Some economists have argued that poorly capitalized thrifts are the most aggressive issuers of “underwater” ARMs. The results using data from the previously named Federal Home Loan Bank Board’s (now Office of Thrift Supervision) Monthly Survey suggest that, on average, insolvent thrifts do not offer deeper discounts than other thrifts, nor do they charge fewer points or lower margins. In fact over the “full-sample” 1986–1989, insolvent thrifts offered smaller discounts than solvent thrifts while charging higher margins and more points. Large discounts on the sampled ARMs were most closely associated with increases in the 1-year Treasury bill rate, but were also associated with higher origination fees and greater margins. Higher fees and margins tend to offset the income loss associated with large discounts.